Groups in talks over merger of Barclays Tanzania, NBC

The National Bank of Commerce (NBC) and Barclays Tanzania could soon
become one entity by next year if talks between Barclays group and Absa become
successful.

The two groups are in talks to combine their African units and complete
a plan started seven years ago in a move aimed at accelerating expansion on the
continent to catch up with rivals.

There’s no certainty the talks will lead to any deal, which wouldn’t be
completed until 2013, the banks said in a statement.

But if successful the deal could help to
reduce operations costs of NBC and Barclays bank, which are currently
struggling with inefficiency. Both banks registered losses, after tax, in the
second quarter of this year.

Other countries where the operations of the two banks could be joined
together are Botswana, Ghana, Kenya, Uganda and Zambia.

Barclays acquired a majority stake in South Africa's third-largest bank
in 2005 but the two have remained separate entities outside South Africa.

This has forced them to run parallel operations in Tanzania. “These are
well-run, profitable operations with little overlap with Absa except for
Tanzania,” said Patrice Rassou, an Absa investor who helps oversee about $41
billion as head of equities at Sanlam Investment Management in Cape Town.

Analysts have said Absa, which is 56 per cent owned by Barclays, has
been slow to take advantage of its parent's wide presence on the continent,
trailing fast-moving rival Standard Bank Absa shelved plans to buy Barclays'
African assets in 2008 citing price differences.

The planned purchase had been part of the original deal when Barclays
acquired its Absa stake. Barclays revived the plan in April 2011, aiming to
consolidate operations at Absa headquarters in Johannesburg and move other work
to Dubai.

Barclays and Absa had already agreed to work more closely together in
their "One Africa" strategy and had set up a joint team of
executives. The proposed combination of the businesses will mirror the
operational structure already in place, said Maria Ramos, chief executive of
Absa and Barclays Africa.

"It will provide a platform for further growth," she said.

The two lenders are hoping to grow their retail and corporate franchise
across the continent, while growing the investment bank. They have launched
financial services in Botswana, Mozambique and Zambia, and are planning to roll
out similar products in Kenya.

Robert Diamond, who resigned as Barclays chief executive officer last
month after the lender was fined for manipulating global interest rates, sought
to boost the British bank’s profit by combining Absa and Barclays’s products
and customer bases across more than 10 African countries. Together the banks have
almost 60,000 staff on the continent.

The South African bank’s shareholders will get “a single entry point
into Africa” from a deal, “giving shareholders in both businesses the benefit
of African growth,” CEO Maria Ramos said in a telephone interview from
Johannesburg today. It’s not clear how the ownership structure will work or
whether Barclays will take a larger stake in Absa, as “there’s lots of work to
be done and it’s very early days,” Ramos said.

The announcement of the potential combination has “nothing to do with
Bob leaving last month” and the operational integration has been underway for
more than a year, Ramos said, referring to Diamond. Barclays’s listed
subsidiaries in Kenya and Botswana will be maintained, according to the UK
bank. Kenya is Barclays’ largest African unit, Ramos said.

Barclays’s pretax profit from Africa, including the bank’s holding in
Absa, rose 13 percent to 910 million pounds ($1.4 billion) in 2011. The unit
contributed 15 per cent of the bank’s 5.97 billion-pound pretax profit.
Together, Barclays and Absa operate in 12 countries and have over 14 million
customers, according to Absa’s annual report.